Identifier

etd-07062009-160543

Degree

Doctor of Philosophy (PhD)

Department

Accounting

Document Type

Dissertation

Abstract

This study examines the relation between accruals quality and price synchronicity, a measure of the relative amount of firm-specific information reflected in price. Higher accruals quality imply better quality earnings news, hence, more firm-specific information is incorporated into price for firms with higher accruals quality. More firm-specific information reduces price synchronicity, hence, we hypothesize a negative relation between accruals quality and price synchronicity. On the other hand, literature shows that accruals quality reduces idiosyncratic volatility which tends to be negatively correlated with price synchronicity. If the latter effects dominate the relation between accruals quality and price synchronicity, we should observe a positive relationship between accruals quality and price synchronicity. Controlling for idiosyncratic volatility, we find a significant negative relation between accruals quality and price synchronicity after controlling for idiosyncratic volatility. We investigate this further by partitioning the sample by analyst following. If earnings information complements analysts’ information, we expect to find a stronger negative relation between accruals quality and price synchronicity for firms that are followed by analysts. If, on the other hand, earnings information and analysts’ information are substitutes, we expect to find a stronger negative relation between accruals quality and price synchronicity for those firms that are not followed by analysts. We find that accruals quality has a greater impact on price synchronicity for firms with an analyst following compared to firm that do not have an analyst following. This is consistent with the notion that earnings information complements analyst information.

Date

2009

Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Cheng, Cheng-Shing Agnes

Included in

Accounting Commons

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